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Franchisors will face many intellectual property (IP) considerations. This is because you are allowing your franchisees to use and profit from your intellectual property. When you become a franchisor, you will need to correctly identify your intellectual property. Once identified, you should register trade marks, register your company and implement trade secrets. Another important consideration is how you will allow your franchisees to use your intellectual property. You can do this through either a licence agreement and a franchise agreement. This article sets out some intellectual property tips for franchisors and explains what you should know about:

  • trade marks, company registration and trade secrets; and
  • licence agreements;
  • franchise agreements.

Types of Intellectual Property

If you run a successful franchise system, other companies may try to poach some of your intellectual property. You can keep your business safe with:

  • trade marks;
  • company registration; and 
  • trade secrets.

When you correctly identify your intellectual property and register it, you will have certain ownership rights and protections. These include:

  • exclusive use and profit of your intellectual property;
  • the power to determine who else can use and profit from your intellectual property; and 
  • legal protection in the case of infringement.

Trade Marks

Trade marks identify and protect the parts of your business that make it recognisable. This could be a logo, colour or smell. You may decide to trade mark many parts of your business. 

For example, you could apply to trade mark your packaging, your tag line and your logo. 

In New Zealand, the Intellectual Property Office New Zealand (IPONZ) administers trade marks. You can apply for a trade mark via their website. Unregistered trade marks also have ownership rights and protections. Unregistered trade marks must:

  • be original; 
  • be unique; and 
  • have a long-standing reputation with your customers in your market. 

Company Registration

You can register all details to do with your company with the New Zealand Companies Office (NZCO). This includes your:

  • company name;
  • directors; and 
  • shareholders.

Registering these details will mean that you are complying with New Zealand laws and keeping your company transparent. NZCO provides you with:

  • a range of tools, so that you can manage your company in one place; and
  • all of the up to date information you may need when starting and maintaining your business.

Trade secret

A trade secret is a way for you to keep all of your vital information within your company. This could be anything from a secret recipe to a list of clients. You can enter into trade secret agreements with those you work with and your employees. This will bind others to keep these important pieces of information confidential.

Licence Agreement 

A licence agreement is a contract in which the owner of the intellectual property gives permission to another party to use that intellectual property. Licence agreements are very flexible and can be tailored to suit the needs of your business transaction. You can specify details such as: 

  • the length of time the intellectual property will be used; 
  • how the intellectual property can be used; and 
  • where the intellectual property can be used. 

Franchise Agreement 

In comparison, a franchise agreement is a contract where the owner of a franchise grants permission to another party to operate their own franchise business which uses all of the intellectual property you have built. Franchise agreements are ongoing and can be altered over time as your businesses grow. 

A franchise agreement is not as flexible as a licence agreement may be. This is because you may want to limit what franchisees can do under your brand name. 

For example, your franchise agreement could say that intellectual property will be for the use of marketing only and any changes will have to go past you as the franchisor. This means you should have more control over your intellectual property under a franchise agreement. 

Key Takeaways

Franchisors should protect their intellectual property so that it is safe when they decide to engage with franchisees. As a franchisor, this will help to protect your business as a whole and allow you to enter into licence or franchise agreements. There are tools available to safeguard your intellectual property, such as trade marks, company registration and trade secrets. If you need assistance with your franchise, contact LegalVision’s intellectual property lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

How do I set up a franchise agreement in New Zealand?

The Franchise Association of New Zealand can provide you with basic templates on their website. However, it is always best to seek legal advice when entering into a legal contract.

How much does it cost to register a trade mark in New Zealand?

Generally, it costs $100 per class you wish to register it with.

How long does trade mark registration last in New Zealand?

A registered trade mark lasts 15 years in New Zealand.

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